Novak Company asks you to review its December 31, 2017, inventory values and pre

Question

Novak Company asks you to review its December 31, 2017, inventory values and prepare the necessary adjustments to the books. The following information is given to you.

No.

Account Titles and Explanation

Debit

Credit

1. Novak uses the periodic method of recording inventory. A physical count reveals $505,014 of inventory on hand at December 31, 2017. 2. Not included in the physical count of inventory is $28,853 of merchandise purchased on December 15 from Browser. This merchandise was shipped f.o.b. shipping point on December 29 and arrived in January. The invoice arrived and was recorded on December 31. 3. Included in inventory is merchandise sold to Champy on December 30, f.o.b. destination. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale on account for $27,520 on December 31. The merchandise cost $15,803, and Champy received it on January 3. 4. Included in inventory was merchandise received from Dudley on December 31 with an invoice price of $33,605. The merchandise was shipped f.o.b. destination. The invoice, which has not yet arrived, has not been recorded. 5. Not included in inventory is $18,361 of merchandise purchased from Glowser Industries. This merchandise was received on December 31 after the inventory had been counted. The invoice was received and recorded on December 30. 6. Included in inventory was $22,442 of inventory held by Novak on consignment from Jackel Industries. 7. Included in inventory is merchandise sold to Kemp f.o.b. shipping point. This merchandise was shipped on December 31 after it was counted. The invoice was prepared and recorded as a sale for $40,635 on December 31. The cost of this merchandise was $22,618, and Kemp received the merchandise on January 5. 8. Excluded from inventory was a carton labeled “Please accept for credit.” This carton contains merchandise costing $3,225 which had been sold to a customer for $5,590. No entry had been made to the books to reflect the return, but none of the returned merchandise seemed damaged; Novak will honor the return.

Determine the proper inventory balance for Novak Company at December 31, 2017.
Inventory balance as on December 31, 2017 $______

Prepare any correcting entries to adjust inventory to its proper amount at December 31, 2017. Assume the books have not been closed. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.

No.

Account Titles and Explanation

Debit

Credit

1.

2.

3.

4.

5.

6.

7.

8.

Explanation / Answer

1 Determination of proper inventory Balance: Particulars $ Inventory december 31 2017 505014 Transaction 2 28853 Transaction 3 (No adjustment required as it was already included in inventory) 0 Transaction 4 (No adjustment required as it was already included in inventory) 0 Transaction 5 ( Purchased inventory should be included) 18361 Transaction 6 (Inventory held in consignment should exclude) -22442 Transaction 7 (merchandise is sold should be exclude from inventory) -22618 Transaction 8 3225 510393 2 Adjustment entries Accounts and explantion Debit Credit Include in inventory is merchandise sold to champy on december 30 fob destination. The merchandise shipped after it was counted Sales revenue A/c____________________ 27520                Accounts receivable 27520 Merchandise received from dudley on december 31 with an invoice price of $33,605 Purchases - Inventory A/c 33605          Accounts Payable 33605 Excluded from inventory was a cartoon labeled " please accept credit" Sales returns A/c 5590             Accounts receivable 5590

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